Final Report: July 31, 2007

Prepared for the Washington Department of Natural Resources
as requested by the Washington State Legislature
by the College of Forest Resources, University of Washington

The report, as requested by the 2005 State Legislature, provides findings of research over the past two years to study the timber availability conditions and management alternatives, the economic contributions the forest lands directly and indirectly make, the competitiveness of the industry in Washington, the land-use pressures that exist for these lands, and the financial returns of State-owned forest lands.

This 4th Progress Report on the Future of
Washington Forests and Forestry Industries requested by
the 2005
State Legislature serves as a preliminary summary report
identifying important issues that will be further
developed in the final report. A Roundtable was held at
the University October 30-31, where 65
individuals commented on the findings of Progress Reports
2 and 3. This Progress Report contains
findings presented at the Roundtable but not complete at
the time the 3rd Report was written, some new
findings discussed at the Roundtable, and questions from
the Roundtable that should be assessed at the
November 20-21 Forum. A Roundtable Discussion Summary prepared
by Washington DNR supports this
4th Report.

Please consider this Third Report as a side-by-side document
to the Second Report (July 2006), except
where the executive summary suggests otherwise. This Third
report is intended
for the most part, to supplement, rather than replace,
the Second report.

In the Timber Supply and Forest Structure
section of the Third Report we include:

A county (Lewis) pilot study on fish-bearing
and headwater stream protection, showing estimates of
stream buffer impacts
and riparian land conversion issues.

Eastside forest health, insect, fires,
and climate treatment, including the alarming increase
in mortality
from insects
as well as the climate-driven increases in
fire hazards

The Economic Contribution section
is essentially rewritten, inasmuch as the Second
report had very little data at the
time of writing. In this section we provide a Global
Overview of Who Produces and Consumes, a review of
Washington Production,
and an assessment of Competitors to Washington producers.
These sections are linked to the section of the timber
supply study, Impacts of Management Treatment Alternatives
on Regional Economic Activity.

The Competitive Position section has
significantly updated the data of the Second report and
should be read as a new
section.

The Land Conversion section has much
additional information to supplement the Second report,
with actual Westside land
use and land change data, and forest ownership transfer
data, including the extensive increased forest land
use conversions in recent years.

A study on the Future of Washington Forests
and Forestry Industries was requested by the 2005 State
Legislature. Each study area will examine the impact of
different management influences and alternatives, providing
a rich array of information from which the Washington Department
of Natural Resources (DNR) and the University of Washington,
College of Forest Resources (CFR) will collaboratively
develop policy recommendations for the Legislature. The
following progress report is intended to provide preliminary
information that will be used in later stages of this project
but may have value now for identifying issues that will
be important for policy consideration. (This PDF
is 2.5 MBs; it will take a few moments to open).

Below is a preliminary breakdown
of the deliverable information, and a link to the original
proposal.

In 2005, the Washington State Legislature appropriated $1 million
to the Department of Natural Resources (WA DNR) to contract with
the UW College of Forest
Resources (UW CFR) for the preparation
of a comprehensive report on the future of the state’s forests.
In this report we will provide:

Policy recommendations to enhance the state’s competitive position
in the forestry and forest products industries, and to ensure that a productive
forest land base continues to be managed for forest products and amenities, including
recreational opportunities, on the state’s working forests.

Specific recommendations to assist Cascade foothills landowners
in keeping working forests intact while accommodating new uses
to strengthen the economic
and natural benefits from these lands.

An assessment of the expected rate of return from State-owned
forest trust lands.

The final report will be completed by the end of FY 2007. Preliminary
results and recommendations will be available for consideration
by the 2007 legislative session. The report’s research results
and policy recommendations will provide input to policy decisions
at the state and local levels,
serve as a framework for public forums that will also help shape
forest policy, and enhance discussions convened by UW CFR’s
Northwest
Environmental Forum. Legislative leaders can consider
study results in crafting legislative policy.

UW CFR researchers in forest economics, forest products marketing
and trade, and forest land use and policy will prepare five specific
studies in fulfillment of the contract with WA DNR:

An update of the 1992 timber supply study for Washington State.

An independent assessment of the economic contribution of the
forest products industry and secondary manufacturing to the state’s economy.

A comparison of the competitive position of the forest products
industry in the state with respect to other U.S. regions.

An assessment of the trends and dynamics that commercial and
residential development play in conversion of the state’s forests to non-forestry
uses. The Cascade Land Conservancy, as a subcontract partner with the College,
will
prepare findings on Cascade foothills land use issues.

An assessment of the expected rate of return from State-owned
forest trust lands.

WA DNR intends to convene an advisory body representing a broad
range of stakeholders, to consider the UW CFR study findings and
potential policy recommendations. WA DNR will also prepare a final
overview report to the legislature, summarizing study results and
stakeholder discussions, and containing policy recommendations.

We will assess the role, over time, of the primary and value-added
wood industries in Washington’s economy, and project the
likely near-tem regional contribution (both in timber-dependent
regions and urban areas). Using input from the Timber Supply
and Forest Structure Studies and recent CINTRAFOR research projecting
an expansion of primary industry investments, we will:

Link investment potential to future economic contributions and
their impact on value-added wood industries and disparate forest
landowners, including
factors that constrain investments.

Describe key factors of productivity and key drivers at state
and county levels.

Weak export markets and a changing competitive environment have
adversely affected the international competitiveness of Washington’s
forest products, especially high-value log exports and plywood
production. At the same time, growth in the U.S. housing sector
has provided consistent demand in the domestic market. We will
examine:

Economic and other factors that determine profitability and
competitiveness of the various classes of Washington’s
private and public commercial forest lands.

The effect of regulatory constraints, policies, and tax burden
(harvest and ad valorem taxes) on the competitiveness of the
state’s forestry
sector, relative to other regions.

Conversion of forest lands to urban uses diminishes environmental
services provided by forests and constrains the economic, social,
and ecological functions of adjoining private and public forest
lands. We will:

Analyze areas in Washington where working and non-working forest
land use has changed or is likely to change to non-forest land
uses and identify factors
influencing conversion.

In collaboration with the Cascade Land Conservancy, provide
specific recommendations for Western Washington Cascade foothill
forests in King,
Pierce, and Snohomish counties and identify approaches for Whatcom, Skagit,
Thurston, and Lewis counties.

In analyzing the asset value of WA DNR granted lands, this study
will utilize the different approaches that exist to measure an
asset’s income-producing capability, such as Return on
Investment (ROI) or Internal Rate of Return (IRR). We will:

Examine revenue from timber and other sources, factors such as
export and other regulations, market trends, and management costs.

Summarize and evaluate previous WA DNR trust land valuation,
including a discussion of the legal requirements for trust land
investment and the
relationship between state general capital funds and capital funds available
for acquisition
of trust lands.

Assess expected rate of return from state granted lands, describing
methodologies and indicators, and recommend appropriate measurement
of investment returns
from granted lands.